MORGAN Stanley, the American investment bank which coined the term "Celtic Tiger" 18 months ago to describe the Irish economy, has warned that Ireland's current low inflation rate is unlikely to continue indefinitely.

In its latest analysis of the Irish economy, Morgan Stanley economist Mr Kevin Gardner warns that as demand rises, suppliers and distributors will increasingly try to widen their margins, "suggesting that the recent run of subdued inflation cannot continue for ever".

The bank is also mildly critical of the Central Bank's recent monetary policies, particularly when combined with the budgetary loosening of fiscal policy.

It has cut its earlier growth forecast for the Irish economy from 6.5 per cent to 5-6 per cent.